The global travel industry is experiencing
unprecedented growth. The World Travel and Tourism Council estimates travel
contributed more than $8.3 trillion to the global economy in 2017 and predicts
that number will grow to $12.5 trillion by 2028.
That upward trajectory is fueling an active startup ecosystem.
Around the globe, entrepreneurs are working on
disruptive solutions to fix inefficiencies and address pain points, with work
spanning from small-scale individual developers in remote corners of the globe
to well-funded initiatives in tech epicenters.
According to Phocuswright's State of Travel Startups data,
about 2,000 active travel and mobility tech startups have been founded globally
since 2008, and venture capitalists invested $31 billion in them in 2017, up
from $19 billion in 2016. And the allocations in early 2018 - $4 billion in the
first six months across 160 deals - put this year on pace to set a new record.
But what’s not evident in those figures are the thousands of struggling
startups, the ones being dismissed by investors or shutting down after years of
trying to make it.
In the last few years, several support programs have launched to help entrepreneurs
evaluate, develop and grow their innovative ventures across every aspect of
travel and tourism.
For the third installment in our series on
startups, we talk to representatives of three such programs – Plug and Play Travel and Hospitality,
Amadeus for Startups and MIST (Mekong Innovative Startups in Tourism) – to find
out what they offer and where they see opportunities for success.
Plug and
Play
One of the
best-known and largest accelerators is Silicon
Valley’s Plug and Play, founded in 2006.
Ten years later, in 2016, Plug and Play launched its Travel and Hospitality practice, one of 15 industries the accelerator engages with to bring services to startups, corporations and investors.
For the two Travel
and Hospitality accelerator programs each year, Plug and Play gathers input
from its 22 corporate partners in the sector - brands such as Accor Hotels,
JetBlue Technology Ventures, Carlson Wagonlit Travel and Delta Air Lines - to
understand what innovations they're seeking.
Those interests create the
criteria for a list of 100 startups from which the partners select 30. Those 30 are then invited to pitch for a chance to be one of 15 to 20 that participate in the
90-day accelerator.
“During
those 90 days, the corporate partners have an opportunity to do pilots, proof of
concepts, licensing deals, partnerships,” says Amir Amidi, Plug and Play’s
managing partner for Travel and Hospitality.
“It’s really
a way of bridging the gap between the travel leaders that have the customer
base and the distribution channels that obviously have a lot of pain points as
it relates to their IT and innovation road map. We essentially become an
extension of their internal innovation projects and their innovation teams.”
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Additional
services include quarterly “deep dives” with each corporate partner to
understand their interests and challenges and then introduce them to startups
suited to meet those needs, and quarterly round table discussions with
partners.
The programs
work together, says Amidi, to create a “win-win-win” for Plug and Play’s
venture arm, the startups and the corporate partners.
As for his
take on the travel startup landscape, Amidi says the industry is “slow-moving
in terms of adopting innovations” and there is “a lot of noise,” with many
startups launched by people that lack the necessary depth of industry
knowledge. But he also sees opportunities, particularly for B2B startups
focused on categories such as personalization, loyalty, ancillary revenue and
security and safety.
“The other
thing we’ve become very good at doing is cross-pollination across industries.
We feel the brand and retail industry - with a lot of credit going to Amazon -
has made a lot more progress than travel when it comes to personalizing their
offerings for their customers. So we may see an innovation in our brand and
retail practice, and we bring that to the attention of travel corporate
partners.
Similarly, in our fintech practice, we may see an innovation on the
blockchain that may be relevant to our travel corporate partners.”
On the
funding side, Amidi says while venture capitalists in North America “are not as
excited about travel and hospitality” due to the high failure rate of startups,
especially those with B2C solutions, he sees “a lot of momentum” in Asia
Pacific.
In fact, by
the end of this year, Plug and Play will launch travel accelerator programs in
both Asia and Europe. Amidi says it is also aiming to increase
investment activity to 20 travel and hospitality startups each year starting in
2019.
To date since the 2016 launch, the practice has invested in about 16
startups (with another 25 travel startups in its portfolio from prior to 2016) and
is on track to make 10 investments by the end of this year.
MIST
Asia Pacific is the fastest growing region in the world for travel
and tourism according to the World Travel and Tourism council, with an average
tourism growth rate of 5.8% and many cities predicted to grow at twice that
rate in the next decade.
But while
China draws much of the attention related to both inbound and outbound tourism,
other countries are also poised for growth.
Jason Lusk
founded and leads Mekong Innovative Startups in Tourism, or MIST, a tech
accelerator operating in the Mekong region, which includes Cambodia, Laos,
Myanmar, Thailand and Vietnam.
In general, the Mekong region is starved for VC funding. It’s a very fragmented region by culture and language.
Jason Lusk - MIST
He says that
region is fastest-growing subregion of APAC and one that is ripe for
innovation.
“In most of
our countries, travel is an incredibly inefficient industry,” Lusk says.
“These are
developing economies, and you are dealing with logistical challenges in moving
travelers from place to place, you are dealing with groups of independent
hotels, you are dealing with airlines that are not at the leading edge of
technology themselves.”
MIST
launched in 2016 as an initiative of the Asia Development Bank, with special
funding from the government of Australia, which is a major trading partner for
the Mekong region and has interest in helping it prosper.
The
initiative has two tracks. The MIST Startup Accelerator incubates early stage
startups headquartered in the Mekong region through a weeklong bootcamp and
then five months of deeper coaching for those selected through a pitch
competition.
The Market Access Program helps tourism innovators from around the
world establish a presence in the Mekong region by providing consultation and
opportunities to visit the area for meetings and networking.
MIST also
works to facilitate connections to venture capitalists.
“In general, this region is starved for VC funding. It’s a very fragmented region by culture
and language,” Lusk says.
“I hear from
VCs all the time that they are very interested in what’s going on in countries
like Vietnam, but they just don’t have visibility, they don’t have a presence,
they don’t know the language.” To help them, MIST brings startups to events
where VCs are gathered, including ITB Asia and Web in Travel.
A variety of
travel-related solutions are needed in the region, says Lusk, from marketplaces
that consolidate tour and activity providers to technology that serves Chinese
travelers visiting the region to payment solutions.
“When you
are looking at a tour operator in a secondary province in Myanmar or Laos, that
operator doesn’t necessarily have access to a bank account. So there’s room for
fintech solutions to fill that gap and give access to the industry in the more
remote corners of the greater Mekong region and give them the ability to take
that international customer.”
Looking
ahead, Lusk says MIST will continue to support early stage innovators in the
Mekong region, but he plans to put more emphasis on working with innovators
from around the world.
“We are
getting pinged by pretty significant folks in the global travel industry on a
regular basis - all engaging because they see this region as one that is ripe
with opportunity and one that is difficult to navigate on their own.”
One of MIST’s
strengths, says Lusk, is the diverse backgrounds of the staff and advisors.
“You need
people who are international operators, who can connect to global ecosystems,
who have perspective on opportunities here based on their experience operating
in other regions,” he says.
“But you
also need deep local knowledge because each of the five countries has a
different business culture, has different market realities that need to be
navigated.”
Amadeus
Startup
programs operated by travel brands are fairly common – examples include Booking’s
Booster Program, Expedia Labs, Lufthansa Innovation Hub and JetBlue Technology
Ventures.
Certainly
one of the broadest range of services for startups is offered by Amadeus, which
works with hundreds of entrepreneurs through four programs: Amadeus Explore, a
global startup partnership program; Amadeus NEXT, a startup community program
for Asia Pacific; Amadeus for Startups, a global commercial startup program;
and Amadeus Ventures, the company’s global venture capital fund.
The travel startup landscape is slow-moving in terms of adopting innovations.
Amir Amidi - Plug and Play
“The
multiple programs give us diverse opportunities to expose these new ideas and
business models to our internal business units, our broad range of customers
and our partners to test, pilot and foster growth,” says Kerri Zeil, head of Amadeus
for Startups.
“And our investment fund provides insights into the startup
ecosystem, emerging trends and an avenue to financially support the startups
that are strategically aligned with our priorities.”
Launched in
May 2015, Amadeus for Startups is a hybrid program that offers both commercial
services – technology and data solutions – along with access to industry
expertise and support services from subject matter experts and a network of
incubators, investors and consultancies.
“At any given time, we’re speaking to probably 60 startups,”
Zeil says.
“I have a pipeline of about 500, which
is very hard to get under, but through the qualification process we prioritize
those so we can speak to them in value order essentially. And we have probably
put into production live in the travel marketplace about 120 at various stages
of maturity.”
Startups come in to the program through
existing lead generation channels at Amadeus, by filling out a form on the
Amadeus for Startups website and through partners such has Travel Startups
Incubator.
Zeil and her
team assess each one, looking at the same elements a venture capitalist might consider: What is the current stage and funding of the startup? How strong is the team?
What is the business model?
“We want to
assess and qualify startups that really align with Amadeus’ core values,” Zeil
says.
“We look at is it something we can help them with, and is it
something we can take advantage of as well? We are a commercial program, so we provide
support, but we also want to help startups with all the assets we have in the
program to prove out a successful MVP [minimum viable product] if they are
early stage or to launch their product and ultimately help them scale. Their
success ultimately brings us success.”
Zeil says
she also collaborates with Amadeus’ other startup programs, for example to
cross-refer startups or occasionally to make an introduction between more
mature startups and the Amadeus Ventures investment arm.
About half
of the startups that come into the program are interested in using Amadeus’
data solutions to create a travel technology product that they can scale
through partnerships with online travel agencies or travel management companies.
Zeil cites examples of startups
developing solutions to help airlines do “cool and unique things … around gaming
and distressed inventory,” and to help airports find new opportunities to sell
duty-free products during stopovers and layovers.
“We
have underlying assets and solutions that are providing huge value that, three years
ago when we launched the program, we wouldn’t have necessarily thought that this
travel tech group would grow so largely and that we have solutions to offer
them, even if they aren’t resulting in a booking, for example,” she says.
Zeil is now working
with colleagues around the world to globalize the Amadeus for Startups program.
She says it expects to be fully operational in Asia Pacific, Europe and Latin
America by the first quarter of 2019.
“We
are continually trying to learn and improve, and to help anywhere we can
through support, expertise, a high-touch approach and making it affordable [for
startups,” she says.
“We
don’t expect everyone to be successful, but they might be a few gems in there
that could be our next large online partner.”